Pub-103, Penalties for Tax Avoidance Transactions

1. Participant Penalties
2. Material Advisor Penalties

Participant Penalties

• Failure to disclose participation in a reportable transaction penalty
  • $15,000 for each undisclosed reportable transaction or $30,000 for each “listed transaction.” The total penalty imposed shall not exceed 10% of the increase in net income or reduction in loss that would result if the taxpayer had not participated in the reportable transaction.
• Reportable transaction understatement penalty
  • 20% of deficiency or 30% if the transaction was not disclosed.
• 100 percent interest penalty
  • 100% of interest assessed on the tax avoidance transaction deficiency from payment due date through date a notice of deficiency is issued.

Material Advisor Penalties

• Failure to register tax shelter penalty
  • $15,000 for each transaction or $100,000 for each unregistered “listed transaction.”
• Failure to maintain a list of investors penalty
  • $15,000 for each failure or $100,000 if the failure involves a “listed transaction.”
• Promoting tax shelters penalty
  • The greater of $10,000 or 50% of the gross income received (or to be received) from anyone required to file an Illinois return and to whom you furnished a false statement.